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Nvidia's star CEO Jensen Huang just resigned over an affair with a suspected spy for China and allegations of a second affair with a subordinate. Henry, just tell us what's going on in this extraordinary, uh, saga. Well, the situation got crazier and crazier as the week went on. If you, uh, rewind time to the weekend, that's when Jensen Huang admitted to having this affair with, uh, a supposed Chinese agent. It's worth noting that Ki, er, China denies that she is their agent. Jensen Huang says he didn't know about these, uh, suspicions, but, uh, that's when he admitted to it. And then, within a week, speculation arose about whether he would be able to
stay in office. Because of these rumors, the share price fell by the end of Wednesday to about 3% below the closing level on Friday. Then it turned out that he had a second affair with one of his subordinates, uh, and they said that he wouldn't be able to hold on, that he would most likely leave. The stock started to plummet premarket, and today he resigned, and it looks like it knocked about 11% off the stock price in a day, which is a pretty impressive number for one person. That's almost half a trillion dollars of Nvidia's market value, uh, lost because the boss was forced to resign.
This is what you call key person risk. Yes. It's worth emphasizing how unexpected this was. Prediction markets had pegged the likelihood of him leaving by the end of the year at just 30% as of 10.30pm last night UK time. So, less than, uh, less than 24 hours ago, the probability was less than a third. Let's talk about what that means, because Archie, Nvidia-it's not just, you know, a giant company. This is a company at the center of AI, not just because it makes chips, but because in a sense it is a kind of central bank for artificial intelligence. Can you explain what the domino effect could be for the entire industry? That's right. This is a complex aspect that is both central to the industry itself, both
through the development of the chips that drive it, and the funding of a significant portion of the industry that then uses these chips to create AI services. And the combination of these things has been very successful for Nvidia so far. The company has managed to create huge demand for its products and services, and in many cases this has been driven by Jensen Huang's personal connections. He has been a key figure in this industry for a very, very long time, involved in resolving these deals and their execution. So now we have a double sense that Nvidia itself is in trouble as a company. I mean, the stock price drop is staggering, but also a figure who is central not only to
Nvidia internally but also externally in terms of how it worked with the broader AI industry is also leaving. It's hard to overstate how central a figure Jensen Huang was for Nvidia. I mean, he obviously founded it. He brought, I think I saw somewhere, 700,000% profit to investors, but he had, I think, 60 subordinates, and no obvious successor. Do we know that we had- we appointed an interim successor, I think, if you.but what's your feeling about how the company will function Well, I think that's the main question right now, because clearly this is not a company that had a ready successor. The CFO is going to take over, and I think the question investors now have to answer is: Does Nvidia's short-term reliance on
Huang just reflect the management structure there, or is it something deeper? Is it true that without him at the helm, Nvidia will no longer be able to produce the best chips, and that he was the one who provided that "special ingredient"? And I think the honest answer is that it's very difficult to estimate. The market thinks that yes, he was very important, enough that now you get a huge risk premium because of his departure. And so it really seems like this is further evidence for people who say that CEOs and company bosses- you know, not much else matters. They create enormous value. You take them away and, you know, the value is destroyed on a large scale. Personally, I find it quite hard to imagine that there aren't
executives who could come in and do at least an acceptable job at Nvidia, given the scale it has achieved and the advantages it has in the market. But it's true that the market assessment is that a lot of value has been destroyed here But the value has been destroyed, and he is irreplaceable. I think I share your opinion that no one is ever irreplaceable, but another. You should say that this is our boss. Another area, Alex, where I think changes could happen is geopolitics and politics, because Jensen Huang was not only close to President Trump, but he was also an outspoken advocate for open
source models and, in fact, selling his chips to China. Do you think there could be any broader implications in this area? I think it's entirely possible, and that's one reason why the broader market might feel its absence. Huang was not only close to Trump, remember, he was also quite close to Xi. He was one of the few people in the American AI industry who knew specific Chinese politicians and could communicate with them. In China, he was literally a rock star. I was in Chengdu earlier this year. You know, his pictures hang on the walls of the restaurants they visited while walking around the city. He's a
real superstar there. And no matter where Nvidia directs its talent search, it's highly doubtful they'll find anyone who can replace this part of its image and significance. So the only direction I see is, you know, a further cooling of relations between the Chinese and American AI industries. Let's now take a step back and delve into the issue of key person risk. Because this isn't just about Jensen Huang, Alex. I mean, this industry is led by people we know by name. And I wonder if, in light of this, people will rethink the concentration of power, and therefore the risks associated with individuals. I think there are arguments on both sides, right? Certainly. The concentration of power is enormous.
Zach, Elon Musk, Dario and Sam. Zach is probably no longer Mark for many, but simply Zach, but at least these are monosyllabic names, if not their full names. They all concentrated incredible power and wealth in one hand. Many of them are literally impossible to fire at these companies, and at a level that even Huang has not reached. Elon Musk owns so many shares and control of the SpaceX board of directors that no one can remove him. Perhaps he will resign someday, but it is impossible to fire him This is a crazy state of affairs, and the tech industry takes it for granted.
The fact is that this lesson can be interpreted in any direction. If Huang's departure leads to the collapse of Nvidia, and the company never recovers from it, it will be a strong argument in favor of those who argue that Elon Musk should be given absolute control of SpaceX. After all, if SpaceX is doomed without Musk, then you will give him everything he wants to keep him in his position, because that is where the value lies. Do you really believe that argument, Henry? Well, Zanni, you reminded me that when you interviewed Elon Musk, you asked: What would happen to your companies if you got hit by a bus tomorrow? And he replied that they would work fine for a while, but he probably hinted that in the long
run they might lose their innovativeness. Look at the most valuable company in the world today-Apple, which successfully survived the death of its founder and still holds a leading position. So, you know, I believe that people like that create tremendous value. I think they are most useful in the early stages of a company's development, and as it matures, I believe they become much more replaceable. I would probably single out Elon Musk as someone who truly has some special knack for hard work and squeezing the result to the last drop. Although it's interesting that, as you said, he clearly stated: he has a five-year product development plan, and everything will be fine with SpaceX. After that, it may not be
so innovative anymore. So, I think the importance of such people can be exaggerated. We'll know in a few days, or more precisely in the coming weeks, whether this is really a risk for Nvidia, but I suspect, as you already said, mentioning Steve Jobs. I mean, companies can really function without people who seem indispensable. Another point about Nvidia: it highlights the fact that if you work in any way in the national security field, you can talk all you want about the board structure, but at the end of the day, there is a "super-shareholder"-the government. Mm. And ultimately, it doesn't seem like Huang has lost the trust of the US government. But if you're someone like Elon Musk, I think it makes it clear: you can
talk about your irreplaceability, but if SpaceX finds itself in complete opposition to the US government, I wouldn't want to be in Elon Musk's shoes. Although I think another surprise in this whole Nvidia story might be the question of possible repercussions from the US government, where, you know, what happens next, I think we don't know yet, but it's certainly an issue worth exploring.
